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International Journal of Scientific & Engineering Research, Volume 5, Issue 10, October-2014

ISSN 2229-5518

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The Role of Public Sector in Promoting


Entrepreneurship: An Analytical Review of
Pakistans Economy
Syeda Hoor-Ul-Ain (Research Scholar, Department of Public Administration, University of Karachi), Dr. Syed Shabib Ul Hasan
(Associate Professor, Department of Public Administration, University of Karachi), Shakeel Sajjad (Research Scholar,
Department of Public Administration, University of Karachi)
Abstract - The research focuses on the understanding of the role of public sector in catalyzing economic growth by promoting
entrepreneurship in Pakistan. The concept of Entrepreneurial Government is emerging, in which public organizations/ institutions have to
play an innovative role in nurturing entrepreneurs across the country. For this kind of entrepreneurship to thrive, governance is the key for it
and can provide the right incentives to innovate financing instruments and business models to meet new challenges while putting
accountability mechanisms in place to avoid the pitfalls of unconstrained power. The study will bring out more insight into the important
aspects of economic development with a view to explore a causal relationship between nurturing of entrepreneurs and incubation of feasible
indigenous environment through governmental policies including role of public sector institutions and business development centers in
creating enabling environment and promoting entrepreneurship and innovation at the national level to bring about a change in the economic
development of Pakistan.
Index Terms - Public Sector, Entrepreneurship, Entrepreneurial Ecosystem, Entrepreneurial Government, Entrepreneurship Development
Centers, Governmental Policies and Pakistan.

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1. INTRODUCTION

ntrepreneurship has become a buzz word and


received a great deal of importance all over the
world.
In
Pakistan,
the
discipline
of
Entrepreneurship achieved important status in
1980s and continues to receive vital governmental
attention for its incubation in indigenous environment.
Research articles, books and many studies in the Applied
Public Sector Economics argue that Entrepreneurship is
good for economic growth because it impels
improvements
in
productivity
and
economic
competitiveness with technological advances and
economic liberalization (Drucker, 1985; Acs, 2006; Hasan
et al., 2012). Jean-Baptiste Say, a French economist
defined entrepreneurship in terms of creating economic
value in about 1800 The entrepreneur shifts economic
resources out of an area of lower and into an area of
higher productivity and greater yield. In todays
economy, Entrepreneurship is defined as a systematic
innovation, which consists in the purposeful, objective
based and organized search for changes, and it is the
systematic analysis of the opportunities such changes
might offer for economic and social innovation (Tiwari &
Tiwari, 2007; Hasan et al., 2012).
In view of the above, entrepreneurship can be
viewed as an original combination of innovation and risk
taking. In Pakistan, innovation and risk taking is severely
inhibited by the intrusive role of government.

Unfortunately, the government is unable to channelize


socio-politico economic stability in the country. Pakistans
socio-economic conditions are awful and the country is
entangled with unstable socio-political and socioeconomic dilemmas. Although, many governmental
regimes have offered protection/ subsidy policies and
made ample efforts to enhance entrepreneurial activities
in Pakistan but all such hard work do not bring the
desired outcome as instable political condition cause a
major hindrance in executing strategies. Besides law and
order condition & political instability there are further
dilemmas which are bigger and more extensive.
Presently, the accelerating pace of globalization,
the stiffening of competition and economic instabilities
are shifting the focus of public sector from job/
employment oriented economy to entrepreneurs based
economy in Pakistan.
Fostering entrepreneurship is not only vital to
promoting Pakistan's competitiveness but also imperative
for a journey to prosperity for the poor of the country.
Entrepreneurship development has the potential to
create jobs through the formation of new business
ventures; utilization of available labor and resources to
create wealth, stimulate growth, boost the economy and
increases a nation's GDP, and reducing dependence on
social welfare programs (Acs, 2006). Entrepreneurship
ecosystem of Pakistan has also received a great deal of
attention in the American research. According to a study

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International Journal of Scientific & Engineering Research, Volume 5, Issue 10, October-2014
ISSN 2229-5518

conducted by the John F. Kennedy School of Government


at Harvard University in May 2012,promoting
entrepreneurship was one of the most-cited and most
impassioned recommendations for strengthening
Pakistans private sector. the new holy grail for
governments in both emerging and developed countries
is to create an environment that nurtures and sustains
entrepreneurship (Cathcart, et al., 2012).

2. ENTREPRENEURIAL ECOSYSTEM
In todays entrepreneurial ecosystem, the public
sector is at a critical inflection point and enjoying a poor
reputation for a host of reasons. Some of the reasons are
deserved and some are just crap. How and what can
public sector do to improve the alluded perception of
contemptuous economists and stake its claim to be a
credible player as a catalyst for economic growth? The
answers to these questions not only shape up a way
forward but also help the public sector obtaining an
understanding of reforms (including legislative changes)
that are required to develop entrepreneurship.
This issue has also received a great deal of
attention both in practice and in the literature. However,
the literature does not provide a definitive solution to
bridge the gap between the role of public sector
institutions and governmental policies/ initiatives for the
development of entrepreneurship culture but draws
limelight towards synchronization between the two. This
analytical study brings out more insight into the
important aspects of the role of public sector with a view
to explore an alliance between governmental policies and
entrepreneurial ecosystem.

2.2. Role of Governmental Policies and Schemes in


Developing Entrepreneurs
Government has a pragmatic role to play in
providing an overall environment that facilitates people
in identifying and developing entrepreneurial qualities in
them. Governmental role in setting an overall
environment includes financial assistance policies and
schemes, establishment of entrepreneurship incubation
centers, providing safe and crime free society to let
entrepreneurs grow. Supporting policies of government
not only assist entrepreneurs in generating revenues for
the government but also helps in combating with the
unemployment in the country.
Unfortunately, the nationalization period in
Pakistan has affected innovation adversely and in
subsequent years very little growth had been taken place.
As a result, the entire essence and the spirit of innovation
were strangled. Later, PMLN took some initiatives such
as distribution of yellow cabs and interest free loans to
promote small scale entrepreneurs but couldnt incubate a
culture of entrepreneurship in Pakistan due to multiple
reasons. First of all, those who received yellow cabs and
loans did not deserve or need it. In other words, such
people just availed the opportunity as a reward to their
political affiliation. Secondly, deserving candidates,
although provided with the loans, were not capable of
utilizing them in a best possible manner due to the lack of
requisite knowledge and guidance. The result, therefore,
was disappointing where cabs were gradually sold and
loan-money was either spent on luxury or eaten up by
mismanaged businesses.

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2.1. Role of Economy in Developing Entrepreneurs


In Pakistan, entrepreneurs are springing up from
within the society as solo professionals. The outsourcing
trend in the corporate sector has helped in introducing
entrepreneurial mindset across the country. However
such solo entrepreneurs also face immense difficulties
and barriers in establishing their mark in the long run due
to the lack of relevant education (entrepreneurial skills)
and governmental support. Researches indicates that they
are negatively influenced by factors like inflation,
problems of companys registration process, complicated
access to the financial assistance, and cumbersome
procedures (Malik, 2003; Haque, 2007 & Hasan et al.,
2012). Sometime these hurdles emerge from within the
society and can be eradicated by simple steps while at
other times they come forward from outside the society
and difficult to be stamped out.

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2.3.

Role of Entrepreneurship Development


Centers
Many development institutions and business
incubation centers are experimenting to promote
entrepreneurship as a way to help individuals across the
country. In Pakistan, the World Bank and the United
States Agency for Development (USAID) have created
their own Small and Medium Enterprise divisions to
provide funding and entrepreneurial training to the
countrys youth who needs assistance in establishing their
businesses (USAID, 2005; World Bank, 2003; Rajput &
Murad, 2008). Although, a few dedicated public-private
partnership based not-for-profit institutions, career and
entrepreneurship development centers such as the
National Entrepreneurship Working Group (NEW-G),
The Indus Entrepreneurs (TiE), Institute for Advancing
Careers and Talents (iACT) etc., are functioning for
providing financial and educational assistance to the
young entrepreneurs but these institutions cater the
developmental needs at local and regional level only.
However, Small and Medium Enterprises Development
Authority is governmental machinery that supports

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International Journal of Scientific & Engineering Research, Volume 5, Issue 10, October-2014
ISSN 2229-5518

entrepreneurship ecosystem at a national level. SMEDA


has been tasked with an advisory role in the
implementation of PMs youth business loan scheme
across the country. Its role is shaped and influenced by
the countrys underlying economic, educational and
socio-cultural conditions.

2.4. Role of Entrepreneurship Development in


Academia
In Pakistan, the Institute of Business
Administration (IBA) Karachi enjoys the privilege of
being the first academic institution for taking
entrepreneurial initiatives in academia and establishing
the Centre for Entrepreneurship in 2006. Later, LUMS also
landed into the field and started Entrepreneurship & SME
Centre in Lahore to build an entrepreneurial culture in
the country and to support entrepreneurs and SMEs for
future growth and prosperity of Pakistan.
In the corporate sector the initiatives in
Entrepreneurship are also emerging and some of them are
as follows: In Karachi, Shell Tameer program has helped
about 27000 young entrepreneurs through workshops,
seminars and meetings. The Indus Entrepreneurs (TiE) is
a global non-profit organization that promotes
entrepreneurship across the country.
These educational institutions are playing a vital
role in the grooming and development of entrepreneurs
by inculcating sharp leadership skills under the guidance
of experienced teachers and trainers. Other public sector
universities should increase their appetite to get into the
discipline of Entrepreneurship and launch Bachelors/
Masters degree programmes so that the youth will learn
to speak the language of entrepreneurial discourse.

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smoothes her career progression as a consultant in the


field of learning and development as an entrepreneur.
Notwithstanding the above, the research opens
doors for the economists and governmental policy makers
to participate in challenging and yet not attainable goal of
developing entrepreneurship culture in Pakistan.

4. METHODS
This analytical study is of qualitative nature and
has been done in two phases. Phase one is consisting of
detailed/
theoretical
study
of
historical
and
contemporary policies/ schemes offered by the
government of Pakistan for the development of
entrepreneurship culture whereas phase two covers
critical analysis of the role of public sector institutions and
centers in nurturing entrepreneurs.
Phase 1: A comprehensive theoretical analysis has
been carried out for the literature review/
Entrepreneurial Ecosystem. A variety of global
researches published in favor and against the abovementioned argument in international journals will be
meticulously reviewed. Besides, books written by
various economists on the issue highlighting its
significance will be studied for the qualitative,
theoretical and subjective analysis.
Phase 2: To gather a wealth of detailed information
and deep insight into the role of public sector
institutions and centers in nurturing entrepreneurs,
the information will be collected and reviewed from
the published literature available about the
governments
entrepreneurship
development
projects, schemes and programmes.

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3. RESEARCH RATIONALE

5. PROBLEM

The study aims to analyze the causal relationship


between nurturing of entrepreneurs and incubation of
feasible indigenous environment through governmental
policies including role of public sector institutions and
centers in creating enabling environment and promoting
entrepreneurship and innovation at the national level to
bring about a change in the economic development of
Pakistan. Besides, this research provides a way forward to
the Pakistans economy in understanding and developing
of reforms that are required to develop entrepreneurship
intellect.
Subsequently, the study not only helps the
authors in their professional career but also provides a
competitive advantage in pursuing their perspicaciously
pragmatic research work among the researching
fraternity of Pakistan. Inductive theory based research
analysis enriches the authors knowledge bank and

Although Pakistans economy is moving up the


priority list of the international world but still facing
turmoil of poor performance on the continuum of
entrepreneurship. This study is aimed at exploring the
relationship between nurturing of entrepreneurs
(dependent variable) and incubation of feasible
indigenous environment through governmental policies
(independent variable) including role of public sector
institutions and centers in creating enabling environment
and promoting entrepreneurship and innovation at the
national level to bring about a change in the economic
development of Pakistan.

6. SAMPLE
In this study, heterogeneity purposive nonprobability sampling technique was followed to include

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International Journal of Scientific & Engineering Research, Volume 5, Issue 10, October-2014
ISSN 2229-5518

as many as opinions and views contributed by the


economists. A broad spectrum of relevant ideas has taken
in to account as a sample from the universe of all possible
ideas available in literature. This sample consists of
research papers, articles, and books.

7. PROCEDURE

Phase 1: For the comprehensive content analysis


digital libraries such as L.E.J National Science
Information Center of the University of Karachi,
Digital library of George Mason University and
Chartered Institute of Personnel Development, UK
were used. Internet resources had been effectively
utilized for reading recent articles published in
Harvard Business Review, Personnel Today and
Economist that reports on the published economic
surveys.
Phase 2: In context of public sector entrepreneurship
development programmes, the information was
collected from the websites of public sector
institutions and centers such as The National
Entrepreneurship Working Group (NEW-G), Small
and Medium Enterprises Developmental Authority
(SMEDA), The Indus Entrepreneurs (TiE) etc.

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been endorsed that unlike most developed and


developing countries, Pakistan does not have a National
Strategy or a Policy Framework to promote
entrepreneurship. The challenges of promoting
entrepreneurship and innovation in Pakistan are
cumbersome government regulations, limited financing
options for start-ups, absence of bankruptcy protection
laws, weak protection for intellectual property and low
levels
of
education,
poor
perception
about
entrepreneurship as it is equated with small business and
cottage industries only. Besides, entrepreneurship is not
encouraged as a career option for young graduates in our
society. People in the Pakistani society are conditioned to
attach the stigma of failure to the self starters or
beginners. Due to the reason the fear of failure of the new
entrepreneurs compounds on and they hardly get 2nd
chances to prove them-selves in the business.
Strengthening the entrepreneurial ecosystem is
beyond the scope or capacity of any single organization
working on its own. It will require a coordinating agency
to generate collaboration across social and economic
sectors and create integrated linkages between business,
academia, social enterprises, public and private
institutions and regulatory authorities.

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9. CONCLUSION AND THE WAY FORWARD

8. ANALYSIS AND DISCUSSION

Like previous studies, this analytical study


establishes that the role of government is critically
important in creating an enabling environment of
entrepreneurship in Pakistan. Unfortunately in past this
role was more or less dormant with the restrictive
mindset of the government that it cannot produce
entrepreneurs but provide a regulatory and policy
framework for their financial assistance. In the present
era, the government has to bring a paradigm shift in its
conventional mindset to develop the potential
entrepreneurs with entrepreneurial intellect by providing
free consultancy services so that they may be able to
embark on small-scale businesses.
In Pakistan, many previous governments remain
ineffective in playing their true role in developing
entrepreneurs due to the deficient competence in
providing decent business incubation environment. Such
an environment aims at enhancing both socio-politico
improvement and economic expansion by mean of
greater income and better human growth with
entrepreneurial intellect. Unfortunately this has not been
achieved so far for the reason of bad politics, governance
and perennial corruption.
Based on the above-mentioned arguments
presented by various economists and researchers, this has

The research was focused on the role of public


sector in nurturing entrepreneurs and exploring a way
forward to deal with the entrepreneurship challenges via
better strategizing on entrepreneurship mechanisms. The
study deduced that the governmental financial assistance
policies and schemes will not serve the purpose of
entrepreneurship development single-handedly. In depth
analysis of Pakistans entrepreneurial ecosystem
concludes that the government needs to provide stable
socio-politico economic environment and establish
various institutions of higher business education in public
universities
and
business
incubation
centers
simultaneously; focusing on such an educational structure
that craft vibrant and broader educational environment to
transform powerful learners into powerful entrepreneurs.
If the Pakistans economy is to be developed and
the country has to tag it-self as a state of entrepreneurial
intellect, urgent and stringent measures need to be taken.
Some of which are recommended as under:
1. The current government should devise strategy
to channelize interest free loans through
institutions of higher business education in
public universities which have separate
entrepreneurship development departments. At
this level innovative ideas should be supported
with such loans.

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International Journal of Scientific & Engineering Research, Volume 5, Issue 10, October-2014
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2.

At the same time other universities should be


helped and encouraged in introducing
entrepreneurship programs at masters level.
Secondly, the government should target both
rural and urban comparatively less educated but
deserving youngsters through the scholarship
based short-term courses with the help of
vocational institutes. Interest free loans at this
level can be distributed on the basis of the
performance of the individual candidate and the
recommendation of institute.

Integration of entrepreneurship and innovation


with Pakistans economic growth strategies to support
and strengthen Pakistans Entrepreneurship Ecosystem is
of critical importance at a time. Although Pakistans
governmental machinery has been struggling to make the
concept workable but couldnt achieve the desired goal so
far. This study will not only become an aid in exploring
the reasons that cause impediments in the way of
establishing feasible entrepreneurial ecosystem (at local,
regional, and national levels) to start a business but also
serve in meeting the cultural/ social and business
challenges.
It can be encapsulated that the entrepreneurship
nurturing challenges in Pakistan are very much similar to
the other developing countries across the globe.
Moreover, this study will be of assistance in ascertaining
that it is the public sector that accounts for the
improvement in context of its competencies and strategies
to establish its own vision in line with the governmental
policies, rules and regulations to catalyze the economic
growth of Pakistan. It is hoped that this study will inspire
other researchers and provide the impetus for further
research.

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WEBLIOGRAPHY

[1] http://newg-pk.com/, 20 June 2014.


[2] http://www.smeda.org/, 5 May 2014.
[3] https://www.tie.org/, 3 May 2014.

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